3 ways investors can use Twitter

Commentary: Social media may help spot the next trend — or bubble

In 2008, I met Twitter co-founder Biz Stone. At the time, I was leading the build of an investment-education site and I wanted to pick his brain about how we could tap Twitter to help investors harness the power of social media.

Stone said the idea with Twitter was “to share whatever’s on your mind right now.” It’s a concept that can have huge ramifications for those of you looking to put your money to work — potentially alerting you to everything from the latest policy changes at your credit-card issuer to whether a company in your neighborhood is about to start hiring.

On the financial front, there are several ways to use Twitter to help manage investments. “Over the years, Twitter has become a little more intense for generating ideas,” says Stan Wong, vice president and portfolio manager for Macquarie Private Wealth. “It’s like you have a research team of thousands of people.”

And at no cost.

Generating Investment Ideas

You’re checking out your Twitter feed or browsing the its Trends, and you notice a lot of people are reading and talking about “The Hunger Games.” Maybe you hadn’t even heard of the book or the movie. But the volume of comments on Twitter does more than pique your interest — it grabs your attention.

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Twitter has earned seven-figure paydays for some enterprising celebrities, multinationals and anonymous jokesters. Quentin Fottrell joins Lunch Break with five of the most profitable tweets ever. Photo: Getty Images

That’s what happened with at least one investor using Twitter, says Wong. Like many others, he saw that “Hunger Games” was rapidly becoming the next Harry Potter and that LionsGate
LGF, +1.98%
was behind it. “He simply noticed that if everyone’s reading that book, the trend could help boost the company behind it,” Wong says. The movie’s opening — which generated $152.5 million over a weekend — ranked the third biggest of all time, after “Harry Potter and the Deathly Hallows Part II” and “The Dark Knight,” and led analysts to upgrade their ratings on Lionsgate.

The stock is up 67% over the last 12 months, due not only to “The Hunger Games” but to other movie hits and deals, as well.

Most brokerage firms and publicly traded companies have a Twitter account, and investors can easily type in a ticker symbol to follow the business for news updates. You can also create and save searches in your Twitter account.

Gauging Company Sentiment

It’s easy to get the financials on a particular stock, but it wasn’t always easy to get real-time sentiment. What are people thinking right now? What information might they have that is swaying their views of a company?

Last October, Wong wanted to build his portfolio for clients on the U.S. housing recovery theme.

“To get a sense of what investors are thinking — the intangible kind of feel for the company — that’s what I use Twitter for,” Wong says. He says he simply used the Twitter stock tag “$” with the stock’s ticker to research investor interest in PulteGroup
PHM, -0.94%
. That led him to a story featuring an interview with the CEO. Today, he owns Pulte, Home Depot
HD, -0.89%
and Louisiana Pacific
LPX, -0.66%
to complete his housing-market-recovery portfolio. He bought PulteGroup at $17 in November, and it’s now at over $20, up about 21%.

Taking a Contrarian View

While Twitter might more commonly be used to follow the herd, it can help in forming an opposing view of the market as well.

As Wong says, “Twitter is a kind of real-time survey of the sentiment, so a lot of times you can use a contrarian strategy: If people on Twitter seem too bullish about a particular stock or the market in general, you may think it’s time for a pullback and take money off the table.”

Investors like Wong often refer to a weekly survey of investor sentiment published by the American Association of Individual Investors (AAII). But the breadth of Twitter — it reports having 200 million users and 140 million tweets per day on average in the past month — and the immediacy makes the sentiment that much more powerful.

With Twitter and other tools, investors can now access real-time information on just about any topic quickly and easily, putting them on a more level playing field with the big boys.

Jennifer Openshaw is author of The Millionaire Zone (Hyperion), and president of Finect, the online network for the investment and financial advisory industry. Follow her on Twitter: @jopenshaw

Jennifer
Openshaw

Jennifer Openshaw is executive director of the Financial Women's Association and author of "The Socially Savvy Advisor," due out this Fall. She's advised Fortune 500 companies, including Microsoft, and has appeared on Oprah, Dr. Phil, CNN and Fox.

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Jennifer
Openshaw

Jennifer Openshaw is executive director of the Financial Women's Association and author of "The Socially Savvy Advisor," due out this Fall. She's advised Fortune 500 companies, including Microsoft, and has appeared on Oprah, Dr. Phil, CNN and Fox.

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